The rally by the US Dollar and the subsequent sell off in gold has had a knock on effect on silver driving the price down from $21/oz to the $16/oz level. Silver stocks took a clobbering along the way but the worst now appears to be behind us.

Firstly we will take a look at the chart for the US Dollar:

The USD has rallied but we suspect that this rally cannot be sustained. The technical indicators suggest that it is now in the overbought zone. Going forward we still believe that there is more to come regarding the banking crisis and these future revelations will hit the dollar hard. Those holding huge amounts of US Dollars will also be tempted to sell into these rallies thus putting a lid on the dollars ability to go higher.

Now we will take a quick peek at the chart for silver:

The silver price has just turned up and its indicators suggest that we could see a small rally from the bottom of their respective ranges. It’s too early to say that this is a trend but we do expect some sideways consolidation for silver going forward.

As an example take a look at this chart of PAAS which has re-visited its own 200dma and put in a little bounce, typical of a number of silver stocks at the moment. We cant read a lot into it at the moment but the downward slide would appear to have come to rest with a slight reversal to the upside.

Considering the recent rocket like ascent of silver followed by a severe correction it’s probably too early to conclude just what the immediate future holds. Volatility and some sideways consolidation may well be the order of the day. However, if some of your favourite silver stocks have dropped to a level that you are comfortable with, then by all means buy a few now and please don’t be put off by us. This summer may well be different with a few hidden surprises ahead of us so hold on to your hat it will be bumpy!

Reader Comments (1)

I think you were correct when you said the rally will last for couple of months. Now you retreat but the dollar can still go higher. If ECB will lower the rates, dollar may rally. The article is ok, just move the date 1 month forward.